US stock futures moved higher on Tuesday after the Nasdaq closed at a record the previous day. The S&P 500 was also approaching its previous peak as investors positioned for the forthcoming corporate earnings season and continued to favour technology companies benefiting from the artificial-intelligence investment cycle.
The decline in oil prices provided an additional boost to sentiment. Brent crude moved below $100 a barrel as stronger Gulf exports and the G7 emergency stockpile release reduced immediate concerns about physical supply. Lower energy prices can ease inflationary pressure on consumers and businesses, particularly in transport, manufacturing and other energy-intensive industries.
Bond markets, however, continued to present a more difficult backdrop. US long-term Treasury yields remained near multi-year highs, with the 10-year yield reaching levels not seen in more than two decades. Higher yields increase borrowing costs across the economy and can weigh on equity valuations, particularly for companies whose expected profits lie further in the future.
The resilience of equities has therefore attracted attention. Technology shares have continued to rise despite the pressure from higher yields, with Nvidia approaching a market value of $6 trillion and AI-related companies accounting for a significant share of recent market gains.
Investors are also monitoring monetary-policy expectations. Markets have reduced the probability of another Federal Reserve rate increase in October as financial conditions and economic data are reassessed. At the same time, persistent inflation risks mean policymakers retain limited room to ease policy rapidly.
European markets face additional uncertainty from political developments in France and Spain, while energy-market risks continue to influence inflation expectations.
For global investors, the immediate outlook will depend on whether easing oil prices and stronger corporate earnings can offset high bond yields and geopolitical uncertainty. The balance between those forces is likely to determine whether the current equity rally can broaden beyond technology stocks.
